Business success depends on privacy protection

(September 19, 2005) Canadian consumers trust you with their personal information, but tread lightly. Clients are increasingly savvy about risks associated with online banking and financial institution transactions, but a new survey suggests they would take drastic action, including closing their accounts, if their financial institution suffered a security breach compromising their personal information.

The 2005 EDS Financial Services Privacy and Customer Relationship Management Survey found 21% of clients would close all their accounts and move their business to another financial institution if their personal information were compromised. More than half said they would discontinue banking until they felt the crisis was resolved.

The Ipsos Reid survey evaluated customer habits, perceptions and requirements concerning the use of personal information by the financial services industry. Overall, 40% of those surveyed say they are very confident of their financial institution’s ability to protect their privacy, and 54% say they are somewhat confident.

The mixed and sometimes conflicting responses show clients to be intensely opinionated about their privacy rights and acutely aware of how their personal data is protected.

Consumers are wary of having their personal information used for marketing. Although less than 17% of those surveyed objected to receiving unsolicited advice based on financial profiles created using their personal information and data mining techniques, 45% disagreed with financial institutions performing data analysis or mining their information in the first place.

EDS says this indicates a willingness on the part of consumers to receive advice they perceive as valuable, but also illustrates and highlights the concerns that consumers have about profiling practices.

When it comes to sharing information, 95% say financial institutions do not have the right to share any personal client information with third parties. At the same time, between 24% and 38% of respondents say they are willing to let their financial institutions share information like e-mail addresses, number of years they’ve been with their bank, the number and type of banking and investment accounts they have, assets, personal net worth and account balances with affiliate organizations.

This willingness to share, says EDS, is a sign that consumers have a high level of trust with their financial institutions and affiliates.

At the same time, institutions have a fine line to walk in creating and sharing consumer profiles. Consumers have concerns about data profiling, but value the personal advice that may require such analysis. More than three quarters of those who said profiling was acceptable to provide relevant advice or customized services, said they were wary of the practices if the profiles were used to sell products. Among those clients who said they accept profiling, 28% said the data should be securely stored and never used to sell services.

“The act of protecting consumers’ personal information is not only imperative to meet compliance standards, but is also essential to a financial institution’s ability to attract and retain a solid customer base,” says Chris Lord, EDS senior vice president, Canadian financial services. “The consequences are severe for any financial institution that experiences a security breach that leads to a leak of personal information. Our survey clearly shows that consumers demand strong security and privacy measures, and banks and other financial service providers must rise to the challenge or risk losing their customers.”

Filed by Kate McCaffery Advisor.ca, kate.mccaffery@advisor.rogers.com